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Managing Unfunded Partner Retirement Plans: Now's The Time To Consider Alternatives

By Hank Freeman and Sarah Wright
November 30, 2004

Partnerships often provide supplemental retirement benefits to their partners. These plans were established many years ago, and in many cases, do not achieve many of the business objectives for the modern law firm.

Financially, firms do not typically set aside dedicated assets to meet these obligations. Thus, the obligations are actually passed from one generation of partners to the next, akin to the Social Security financing system, whereby active partners' earnings are diminished each year to fund the supplemental pension payments to already retired members. The dramatically increasing ratio of retired to active partners ' exacerbated by baby boomer demographics and the longer life spans of retirees ' has created enormous financial liabilities and sparked real questions of intergenerational equity within firm ranks.

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